It is a challenge to think about the Boxloader business in a traditional ‘make versus buy’ scheme. Like so many medium-sized businesses, the French side-loader expert has developed a more liberal approach to classic business practice by implementing a hybrid model of producing in-house and outsourcing where possible.
Design, assembly and distribution, for instance, are still performed in-house, but manufacturing, laser cutting and welding are sub-contracted. One reason for that set up may be the company’s unusual history – it started off as a small dealership in the West Indies before moving to manufacturing – but according to CEO Vincent Sastre, it’s also a question of common sense. 
“We outsource a large portion of the production process to companies that are leading in a certain field, for example in cylinder production. That allows us to be more flexible and use the latest technology in the market without carrying the overhead.”
Sastre’s theory is a prime example of how today’s business reality is forcing the manufacturing industry to re-examine traditional business paradigms, including the desirability of full vertical integration. Historically, a firm would selectively choose a strategy of vertical integration – i.e. make internally – or outsourcing – i.e. purchase externally – to bring a product to market. In today’s globalised environment, however, businesses tend to think outside the box, bridging the gap between the traditional ‘make versus buy’ decision by combining the strengths of both strategic alternatives to accomplish vertical integration without complete financial ownership.*
Aware of the financial risk of complete vertical integration, Sastre and co-founder Mikael Janghov have tailored a more suitable approach to running the Boxloader business, even if traditional business wisdom cannot categorise it. “Vertical integration can be a highly important strategy, but it is notoriously difficult to implement successfully and when it turns out to be the wrong strategy, costly to fix,” says Sastre. “At Boxloader, we do place value on leveraging internal resources, but we also bring external expertise into the company.”
While he is convinced that importing expertise is the key to succeed as medium-sized manufacturing business, Janghov – and engineer by trade – does not want to be a mere ‘contract manager’ without any hands-on involvement. “We don’t invest too much money in manufacturing but outsource most of it so we can focus on design, engineering and development. We definitely want to handle that side if the business on our own,” he says.
US magazine Supply Chain Quarterly recently coined the term ‘front-end vertical integration’ to describe that phenomenon. “Rather then rely entirely on suppliers that may not be able to meet those requirements, companies can reduce risk by taking more control of production through front-end vertical integration. True vertical integration would have all processes performed in-house. While that may not be practical, doing as much work in-house as possible at the front end … can strike the right balance between outsourcing and in-house control, thus minimising supply-related risk.”
To Sastre, the concept’s key advantage is that there is more time to focus on customer service. “If there is anything that sets us apart in the market it’s our strong focus on the client. Customer feedback is very important to us as a guideline for future product development,” he says, revealing that the company’s origin as a dealership has turned out to be a competitive advantage. “Due to our experience in the retail sector we know exactly what the customer is expecting from us. By nature, our business is very close the market and the end-user out in the field.”
When the company developed the new Multiloader model, for instance, it sent out a whole engineering team to Australia and Sweden to physically experience the market and talk to transport businesses. “That’s why this product is so successful today, it’s built to meet our customers’ expectations. More than 15 per cent of all our staff are working on product development only and we think that is a real strategic advantage for a small company like us.”
And from a management point, spreading the risk made sense as well. “To start up a manufacturing business from scratch is a risky undertaking,” says Sastre. “It took as a while until the customer accepted us a manufacturer, but it was also a great challenge.”
15 years on, the first Boxloader model is still in operation in the Caribbean – and Sastre is convinced that the right balance of manufacturing in-house and subcontracting has been the key to that success. “When the first global blue chip client placed the first order a while back, that’s when we knew we made the right decision.
“We now have the portfolio and the distribution network to service any client anywhere in the world,” he adds, pointing out that the move to becoming a global business was somewhat of a necessity. “As a side-loader specialist, you have to act globally anyway as a lot of the work is coming from in the marine and wharf industry. It’s a tough job setting up an international business, but it has also made us less vulnerable to the economic rollercoaster ride of the past decade.”
Despite the euro zone debt crisis, today’s Boxloader is a healthy €8 million business aiming at an annual growth rate of ten per cent – even in a time of economic turmoil. Annual production in 2012 almost reached the 50-vehicle mark – enough for Sastre to invest into new product development and expanding the company’s footstep in Scandinavia, Australia and Asia. “We’ve invested quite a lot lately so we’re excited for the 2013-14 season as we expect a first return of investment.”
France itself is not very interesting as a side-loader market, according to Sastre, not only because of the general weakness within the euro zone, but also because of strict local regulations that are not compatible with global standards and demand on-going negotiations with the authorities in France.
“Apart from Scandinavia, the market in ‘old’ Europe is still weak. The only growth segment we have identified back home is intermodal transport, but we focus on the wharf business first and foremost,” says Sastre. “Especially the French-administered territory outside of the European continent has a lot of potential. Here, some 300 units are on the road already, and we anticipate a yearly volume of about 30 units including both replacement demand and organic growth. I expect Boxloader to cover a solid 60 per cent of that volume.”
According to Sastre, total global sales amount to about 500 units a year in the contested side-loader market. “Globally, I think our market share is in the 10 per cent range,” he adds.
Experience has taught Sastre that real-life performance is key to success in the side-loader market, not the spec sheet alone. “Payload is important, but the most important thing is how the machine takes the strain of working fully loaded day in day out,” he explains. “The third key to decision-making is after sale value, which is another reason why we leave crucial manufacturing steps to acclaimed experts that can guarantee long-term quality.
“Plus, the last decade has taught us that what is true today can be completely wrong tomorrow due to a singular economic, financial or politic event. Our hybrid concept allows us to react flexibly regarding both design and manufacturing,” he adds, revealing that mass production may afford a different concept. “Our annual volume is reasonable, otherwise we wouldn’t be able offer such flexibility.
“Once you realise that our market is a niche market and even the two biggest companies in the field are still relatively small and family-owned, you will recognise that our approach does make sense from an economical point of view – not to mention the fact that we are not directly affected by the volatile raw material market.”
The ‘manageable’ market size also is a reason why Sastre does not fear any interference by the up-and-coming Asian competition. “To them, a 500-unit-per-year market is financially not feasible,” he says. “As opposed to us, they are vertically integrated in the classic sense – including the full financial risk. They need to create economies of scale to survive.”
The ‘Made in France’ label, however, does not matter all too much in a globalised market, as Sastre experienced. “While some French-speaking countries still appreciate the old label, we don’t really care about the Made in France advantage. For instance, in Australia we have built up a very strong partnership with local company O’Phee Trailers, and 50 per cent of every Boxloader sold there is Australian-made. In Singapore, we have already implemented the same strategy.”
In the long-term, Sastre can see the side-loader concept spread even more around the globe. “The side-lifter technology has proven to be a viable alternative to mainstream equipment – and as international shipping of containerised commodities is indispensable for global trading firms, it is likely to gain more ground in the container haulage and wharf market. And as a small, flexible business, we will certainly be part of that development.”